This Morning: Western Bulks up on Flash, Icahn Throws in the Towel

By Tiernan Ray

Here are some things going on this morning in your world of tech:

Shares of Molex (MOLX) are up $9.17, or 32%, at $38.51, after the stock was briefly halted in pre-market trading before announcing it agreed to be acquired by the multi-billion privately held conglomerate Koch Industries, for $38.50 per share in cash, or $7.2 billion.

One of the two famed Koch brothers, Charles Koch, is quoted as saying Molex is “an exciting acquisition that matches up well with our our culture and our core capabilities,” while Molex's co-chairman, Fred Krehbiel, remarked that it was a “difficult decision,” but that it followed a “thorough review” by the board and provides “outstanding benefits to all our stakeholders.”

Shares of competitor Amphenol (APH) are showing only a modest reaction, up $1.22, or 1.6%, at $76.17.

Shares of Dell (DELL) are unchanged this morning at $13.84, four cents below CEO Michael Dell's proposed $13.88 leveraged buyout of the firm, after the main opponent, Carl Icahn, threw in the towel this morning, releasing a statement saying that Dell and his private equity partner, Silver Lake, “waged a hard-fought battle” and that “we therefore congratulate Michael Dell and I intend to call him to to wish him good luck (he may need it.)”

Icahn reiterated his contention that the price substantially undervalues Dell, and reiterated his view that the board had not played fair when it changed the voting back in July, allowing more arbitrageurs to vote on the LBO.

Icahn quotes Barron's own Andrew Bary, who had written extensively in opposition to the deal: “Andrew Bary at Barron's wisely observed, 'In an action worthy of Vladimir Putin, Dell postponed a vote scheduled for last Thursday on Michael Dell's proposed buyout of the company when it became apparent that there was insufficient shareholder support for the deal'.”

Shares of BlackBerry (BBRY) are up 52 cents, or almost 5%, at $11.36, after The Sunday Times of London's Ben Marlowwrote that billionaire Prem Watsa's Fairfax Financial Holdings, the largest investor in BlackBerry, “has assembled billions in backing from the country’s biggest pension funds for a bid” for BlackBerry after the company last month said its board is exploring “strategic alternatives” for its future.

Shares of Apple (AAPL) are up $6, or 1.2%, at $504.22, as the Street continues to ponder what impact tomorrow's scheduled media event will have, at which the company is widely expected to unveil new models of its iPhone. Analyst Shebly Seyrafi of FBN Securities this morning reiterates an Outperform rating on Apple stock, and raises his price target to $600 from $575, writing that the expected cheaper model of the iPhone, possibly the “iPhone 5C,” could help land China Mobile (CHL) as a customer, and that “the iPhone 5C could result in $2 (4% EPS) accretion in C2014 from China Mobile alone, and possibly $4-5 (10%+) to EPS from all carriers (this would add ~$40-50 to the stock price assuming a 10-11x multiple).”

Meanwhile, Brian Blair of Wedge Partners, warns that InvenSense (INVN), which makes accelerometer and gyroscope parts, and which was expected to benefit from the new iPhone models, “may have hit snag” in its relationship with Apple, and that investors should be cautious, writing, “We believe that InvenSense has recently experienced some issues with Apple, as Apple has ramped volumes of new products.”

“While we don’t know the extent of these issues, our view that there may have been a snag in the relationship that could potentially impact volumes forces us to take the sidelines on the name until we get clarity via the forthcoming InvenSense earnings report and guidance next month.”

InvenSense shares are currently down 51 cents, or 2.8%, at $17.82.

Shares of Western Digital (WDC) are down 48 cents, or 0.7%, at $64.52, after the company this morning announed it would spend $685 million in cash to acquire Milpitas, California-based startup Virident, which makes flash-based accleration plug-in boards for servers to speed up data access. In a statement, Western said the deal will enhance the offerings of its own HGST division's flash-based products, such as solid-state drives (SSD).

I wrote about Virident in this week's Barron's print magazine. The company is among a host of startups challenging established data storage equipment from EMC (EMC) and NetApp (NTAP). However, Virident was among those companies trying to fit in more with the status quo: it has counted Seagate Technology (STX), Western's competitor, as a partner for its plug-in boards.

In response, Needham & Co.'s Richard Kugele, who rates Western stock a Strong Buy, writes this morning that the deal is positive for Western, “as it expands their rapidly growing presence in the SSD world.”

And FBN's Seyrafi, mentioned above, raised his rating on Fusion-io (FIO) stock to Outperform from Sector Perform, with a $15 price target, writing that “WDC is paying $645 million [net of cash] for a PCIe SSD company with little revenue, while FIO had an enterprise value on Friday of $1.2 billion and had $432 million in revenue last year.”

Fusion stock this morning is up $1.83, or almost 17%, at $12.66.

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